Update December 2018: Wall Street Journal: GE Powered the American Century—Then It Burned Out
Update June 20th 2018: CNBC: GE booted from the Dow, to be replaced by Walgreens
Industrial giant General Electric is out of the Dow Jones industrial average and will be replaced by drugstore chain Walgreens Boots Alliance.
GE was one of the original components of the index of 30 stocks in 1896. It has been a continuous member since 1907, or 111 years. In the past year, its stock has been battered as the company overhauls its business.
Imagination at Work? Not so much! Great articles below:
Great article in Bloomberg Businessweek in February 2018: How GE Went From American Icon to Astonishing Mess
Famous for great management, General Electric is staring down a plunging share price, a federal investigation, and possible breakup.
For most of its 126-year history, GE has exemplified the fecundity and might of corporate capitalism. It manufactured consumer products and industrial machinery, powered commercial airliners and nuclear submarines, produced radar altimeters and romantic comedies. It won Nobel Prizes and helped win world wars. And it did it all lucratively, rewarding investors through recessions, technological disruption, and the late 20th century collapse of American manufacturing.
That long, proud run may have come to an end. It happened, as Ernest Hemingway wrote of going bankrupt, “gradually and then suddenly.” GE hasn’t inspired awe for some time now: The company had to be bailed out in 2008 by the federal government and Warren Buffett, and across the 16-year tenure of recently departed Chief Executive Officer Jeffrey Immelt its stock was the worst performer in the Dow Jones industrial average.
The past year, however, has seen GE enter new territory. Since Donald Trump’s election in November 2016, during a stock market boom in which the Dow is up 41 percent, GE has lost 46 percent of its value, or $120 billion. A few months after Immelt retired as chief executive last summer, the company shocked Wall Street by announcing earnings that were barely half of analysts’ already lowered estimates. Soon after, GE said it would halve its once-sacrosanct stock dividend because it was short on cash. It also said it would sell or spin off $20 billion in businesses, including its lightbulb division. (The appliance business was sold to the Chinese manufacturer Haier Group in 2016, along with a license to use the GE brand.)
Then in January came news of a $6.2 billion charge related to costs incurred more than a decade ago by GE’s financial-services business, an announcement that triggered a U.S. Securities and Exchange Commission investigation. GE’s new CEO, John Flannery, has grimly promised that “all options are on the table,” including the once-unthinkable option of dismembering the company entirely.
“It’s like their sails are all torn when they’ve got the perfect wind,”
“Complexity has hurt us.”
GE doesn’t require management wizardry to run properly, because wizards turn out not to exist.
Being an icon isn’t worth what it once was.
Great article in Inc Magazine March 2018: How GE Became a Square-Peg Business in a Round-Hole World
It’s not enough to improve existing businesses, you have to also invent new ones
It’s no secret that General Electric has fallen on hard times. Its CEO, Jeffrey Immelt, was forced to step down last June. In December, it announced that it was laying off 12,000 employees in its massive power business. Its stock has lost half of its value and there’s talk that it may get kicked off the Dow after 110 years.
In an earlier age, such a dismal performance would likely been attributed to corporate rot — an aging industrial firm gets fat and lazy and loses its competitive edge. Yet there’s no sign of that at GE. On the contrary, it seems to be a strong operational company that is highly competitive in the markets in which it competes.
The problem with GE, it appears, is that it has become a square-peg business in a round-hole world. It’s not that it’s gotten lazy, but that it invested heavily in getting better and better at things people care less and less about. That’s a problem few people talk about. We like to believe that success breeds more success, but the truth is that success often breeds failure.